When you are developing office billing policies, reimbursement requirements need to be considered, but may not always be clear. Clinicians ask, “Can I waive patient co-pays?” “Can I offer discounts to patients experiencing financial hardships?” Such questions are important when establishing billing practices within your clinic setting. Getting too creative with your billing policies can lead to charges of fraud and abuse. Private insurers and the federal government have basic restrictions on how to charge patients for medical and health services. Knowing the basic reimbursement guidelines will assist ASHA members with developing successful office billing practices.

Robert B. Burleigh, President of Brandywine Healthcare Services, and a former president of the Healthcare Billing & Management Association, provided answers to common questions about billing policies.

Q: Can I waive co-payments?

Rarely. Insurance companies created deductibles and co-payments as a means of involving patients in the cost of their care and to discourage over-utilization. (Medicare and Medicaid co-pay waivers are not allowed, except under limited circumstances for documented indigency.) Insurers universally impose a contractual duty on providers to make a reasonable effort to bill and collect the applicable co-pay and/or deductible. They view the routine waiver of patient payments as a breach of contract and have initiated litigation against those who flout this requirement. Accommodating patients with individually documented financial limitations is acceptable, but when there is a pattern of routine waivers and no documentation, providers will have difficulty defending their conduct.

Q: Can I offer a “sliding scale” to patients experiencing financial hardship?

Yes. Many medical practices and all hospitals have developed a financial hardship policy to address the documentation and administration aspects of waiving patient liability. Often, the policy is based on federal poverty guidelines. If there is a defined policy and procedure for the consistent administration of an objective and standardized approach, providers are permitted to apply a “fee scale” for indigent patients. The health care provider should have a written policy in place that establishes guidelines for determining a patient’s indigency.

There are many federal programs, community agencies, and similar health care providers with long-standing, formalized “fee scaling” programs. It is advisable to do a little homework and contact local social service agencies and welfare clinics to learn what the community standard is in your area, as there are regional variations. Consistency of administration, objectivity in policies, and documentation of individual eligibility are essential.

Q: Can I offer a time-of-service discount?

Maybe. The question implies that the patient eligible for this offer has no insurance coverage. If that is true, a discount for cash is permitted, according to the Department of Health and Human Services’ Office of the Inspector General in a 2004 letter responding to this question.

However, applying such a discount cannot lower the amount collected to less than the amount allowed (the so-called “allowed amount”) by Medicare for the same current procedural terminology (CPT) code service. Discount-for-cash offers or policies cannot be for an amount less than what Medicare allows because Medicare prohibits providers from charging the program more than is charged to others.

Additionally, according to C. Rathburn and E. Richards (Missouri Medicine, 1998; 95:18–20), time-of-service discounts raise the issue of a provider’s customary charges for a procedure. Many private insurance plans and some federal programs have a “most favored nation” clause in the contract with the provider that entitles the plan to pay the lowest charge the physician bills to anyone. Some providers fear that if third-party payers find out about cash discounts, they will demand a discount for their beneficiaries as well. The health plan would be entitled to the discount if it paid you on the same day services were rendered. Most, however, do not pay you for weeks to months, so the point is moot, according to Douglas Jorgensen, DO, in an article entitled “Opting to Opt In or Out? Reimbursement and Cash Flow Options,” (American College of Osteopathic Family Physicians Web site www.acofp.org, 12/21/05). If, at some point, payers’ reimbursement systems are able to pay providers on the same date patients are seen, this policy will need to be revisited. Check with your local health care attorney as contractual agreements with various third-party payers can present unique circumstances for your practice.

Health Care Fraud and Abuse

Fraud and abuse in the health care system are serious problems that affect all health care payers and every consumer, accounting for nearly 10% of the annual health care expenditure in the United States. Billing practices should reflect complete compliance with appropriate laws. As noted previously, the federal government has specific laws governing financial transactions between health care providers. The federal anti-kickback statute makes it illegal to offer, pay, solicit, or receive remuneration in order to generate business payable by Medicare or Medicaid. Remuneration is specifically defined under the statute to include the waiver of coinsurance and deductible amounts. Violation of the anti-kickback statute can result in criminal prosecution and exclusion from federal and state health care programs.

The Social Security Act prohibits a health care provider from offering beneficiaries of federally funded programs any financial inducement to choose that health care provider for medical services (e.g., advertising “insurance-only” billing). An exception to the beneficiary inducement prohibition is provided in situations where the patient is under financial hardship.

The false claims statute makes it illegal for any health care provider to submit to Medicare or Medicaid bills that contain charges for items or services furnished substantially in excess of its “usual charges.” For example, if a health care provider’s fee schedule allows $100 for procedure X, but the provider routinely waives the Medicare 20% co-payment, the federal government says that Medicare should be billed $64, (that is, 80% of $80 instead of 80% of $100) and that submitting a $100 claim to Medicare is a false claim. Violators of the false claim statute are subject to fines and/or imprisonment, and excluded from Medicare and other federally funded health care programs.

Providers should monitor their practices to ensure compliance with all applicable federal and state laws when determining billing policies.

Examples of Health Care Provider Fraud

Billing for services not actually performed

Falsifying a patient’s diagnosis to justify tests, surgeries or other procedures that aren’t medically necessary

Misrepresenting procedures performed to obtain payment for non-covered services, such as cosmetic surgery

Upcoding, or billing for a service that is more costly than the one actually performed

Unbundling, or billing each stage of a procedure as if it were a separate treatment

Accepting kickbacks for member referrals

Waiving member co-pays or deductibles and over-billing the insurance carrier or benefit plan